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Changing CFPB Regulations Could Impact Collections Income and Compliance Rules


The Consumer Financial Protection Bureau (CFPB) has signaled changing overdraft regulations, which could affect both noninterest income and compliance rules. Having reliable and robust bank collection software that provides a number of key regulatory, operational and governance recommendations helps you address pressures from consumer and regulatory agencies.

In March, the CFPB released a proposal to generate comprehensive consumer protections for prepaid financial products such as reloadable prepaid cards and certain digital and mobile wallets. Under the proposal, consumers acquiring such products would receive a number of Regulation E protections, such as getting disclosures about fees before they acquire a prepaid cards and error resolution rights.

In addition, prepaid products that access overdraft services or credit features for a fee, generally credit cards, would be subject to TILA and Regulation Z, including Regulation Z’s credit card rules. Consumers that choose to access overdraft services or credit features get at least 21 days to repay the debt incurred in connection with using such services or features.

The leveraging of powerful and compliant up-to-date collection software, such as CARM-Pro, increases noninterest income even during times of regulation flux.

Improve Gathering of Existing Fees

The CFPB also continues to research overdraft services and rules governing overdraft and related services. A possible rulemaking might include disclosures or address specific acts or practices. In July 2014, the agency released a report, based on data from sources used in a June 2013 analysis of overdraft practices.

The July 2014 report provided additional information about the outcomes of consumers who do and do not opt in to overdraft coverage for ATM and one-time debit card transactions. The report also explored the transactions that overdraw consumer accounts.

It’s vital that your financial institution judiciously study the collection costs and benefits associated with the customer relationship to ensure the relationship is sufficiently profitable. Banks often lose revenue because they are unaware that the relationship has changed through regulation. In addition, due to regulatory expense, and net-interest margin compression, banks need to have some understanding of way to continue to improve the bottom-line.

Understanding changing regulation allows financial institutions to properly collect noninterest income.

Controlling Compliance Costs

In April, The CFPB announced it had reached a settlement with Regions Bank regarding claims that the bank unlawfully charged overdraft fees to customers who had not opted-in for overdraft coverage. The ruling is the CFPB’s first enforcement action under the Regulation E rule that ban depository institutions from charging overdraft fees on ATM and one-time debit card transactions unless a consumer has opted in. The rule became effective on July 1, 2010 for new accounts and on August 15, 2010 for existing accounts. The consent order requires Regions to pay a $7.5 million civil money penalty in addition to refunding unlawfully charged fees to all customers who have not previously received refunds.

Specifically on the issue of affirmative consumer opt-in prior to charging overdraft fees, it appears that the customers affected were those who had linked their checking accounts to savings accounts or lines of credit to cover overdrafts. After making systems changes in June 2012 to stop the fees and making refunds totaling approximately $47.8 million in 2012 and 2013, the bank discovered additional consumers in 2015 who were continuing to be charged overdraft fees without an opt-in.

In addition to providing the right technology, IBS offers clients with ongoing and dependable training for your staffs. Our Online Self-Guided User Training Modules provides interactive training at no additional cost to support IBS clients, allowing platform users to take the online classes based on their availability.

CARM-Pro, reliable and robust collections software, could root out problems before they occur even when regulations change. It Improves compliance, prevents fees or fines, and in general increase noninterest income.